- Haruhiko Kuroda, BoJ Governor
On Tuesday Japanese Prime Minister Shinzo Abe met central bank's governor during the lunch to discuss the current economic conditions in a calm manner, without adding any pressure. This event can be omitted and not mentioned in the fundamental analysis. However, Kuroda's surprising speech on April 8 shocked markets. He rejected an imminent additional easing of the monetary policy. Nevertheless, during the G20 meeting he claimed the central bank is willing to act in case anything threatens the recovery or can weaken the inflationary pressure. It seems that Kuroda is mixed in his own comments, while voices of those warning against the underestimating the potential effects of the VAT increase are getting louder. The Yen is not moving lower due to its safe-haven appeal, which is boosted by the Ukrainian crisis. The downward pressure on USD/JPY, however, is running out of steam and soon we might see another steady rally.
During this week's lunch Kuroda assured Abe that the central bank will not hesitate to adjust its monetary policy if needed. They both need to steer the land of the rising sun through a slump in domestic consumption that is projected after the April tax hike. While Shinzo Abe made no additional requests for more monetary stimulus it is getting clear that the bank will have to act as soon as they are able to assess the potential damage caused by their own actions earlier this month.
© Dukascopy Bank SA